Ark or Umbrella? The Choice is Yours

It was one year ago today that I blogged about the Dow Jones Industrial average closing at its all time high: “11,723.74. The highest ever. Ever!” Here’s what I said at the time:
Before you get too excited, the NASDAQ is close to 50 per cent below its record high. Still, though, as CNN says in the same piece, “Investors are likely betting that lower energy prices will mean lower inflationary pressures, which in turn makes it more likely that the economy will slowdown, but not head into a recession, as has been feared.”
So here we are, one year later. And that all time high of 11,723.74? Pffft! That was nothing. Less than nothing. This year has seen high after high. After high. As I write this, the market is still open, but there is no possibility that it will close very far from 14,000 where, with notable exceptions (see the graph above), it’s been bouncing around for the last couple of months. Certainly, if the market were to plummet to the high everyone was so jubilant about one year ago, there would be a lot of doom and gloom and running for the hills. There would be chaos.

Still, clearly, as I always say, the Street is not a one way affair. It can not -- will not -- go upwards ever up. It does not work that way. The market is as much subject to the laws of physics as every other damn thing. It’s taking longer to get here than any of us party-poopers ever expected, but the party-poopers are growing in number. Some experts are even beginning to predict that the Fed’s recent attempt to stimulate the economy by cutting interest rates will not only “pave the way for much higher price inflation than Americans have seen in decades, but it will also exacerbate what could be the worst recession in twenty-five years.”

As was the case last year, I have no crystal ball, only the very strong belief that the rain is coming. Get an umbrella. Maybe build an ark. ‘Cause sure as hell: it’ll get wetter before it gets real nice and dry again.


John McF said…
Maybe the best comment on the stock market was from Tony Soprano when his wife wanted to try investing: You need inside contacts way high up to make any money in that racket.

(your comments are good, too, of course ;)
Graham Powell said…
The Dow Jones index (any index, really) doesn't accurately reflect the health of the general economy because failing companies are removed and new, more successful companies are added.

Also, the numbers aren't adjusted for inflation, so they probably WILL go up forever.

Underlying numbers (aside from the mortage industry - where I work!) are actually pretty good. In particular, unemployment has been at historically low records for going on 10 years now.

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